Foreign exchange trading could be driven largely by technical signals over the coming days with very few big hitting economic reports on the calendar. Uneven price action could exacerbate this week with Thanksgiving holiday in the US on Thursday set to cut short trading activity, leaving a number of US economic reports to be crammed into a few days for markets to digest. The US dollar is trading close to a six-month high against the yen and near an 11-month low against the sterling while the yen remains under deep selling pressure, and has tumbled to October 2008 troughs against the sterling before the Bank of Japan minutes which are expected to highlight the bank’s very aggressive dovish message. The sterling has run into a lot of technical resistance following its big gains over the past few weeks and the question for traders this week could be whether or not the sterling has come too far too soon. The euro is trading just shy of an 11-month low against the pound but could bounce back if the numbers ease concerns about looser ECB policy.
Sterling
The sterling’s climb in recent weeks has run into a lot of technical resistance, meaning the sessions ahead could be filled with some choppy price action before UK GDP data. Britain will publish second estimates on third quarter growth this week with the data not expected to show any change from the initial number which showed a comfortable 0.8 per cent quarter-on-quarter expansion. Last week, strong gains for the pound against the US dollar, euro and yen pushed the UK currency to a 10-month high against a currency basket. The sterling has gained by almost three per cent against the euro since October 29.
US dollar
Investors will study several US economic indicators over the coming days for more clues on tapering, with reports due on the US housing market to consumer confidence before the Thanksgiving holiday on Thursday cuts short the trading week. The greenback is trading close to a six-month high against the yen and near an 11-month low against the sterling before data that is forecast to show a rebound in pending US home sales last month.
Euro
The euro could come under further pressure this week ahead of data that is forecast to show low inflation and high unemployment in the eurozone; data which could strengthen the risk of a more dovish European Central Bank. However, should unemployment remain unchanged and inflation rise, this picture would ease pressure on central bankers to add more stimulus and the euro could bounce back. The euro sank to fresh lows against the US dollar and pound earlier this month after the ECB cut interest rates to just 0.25 per cent and left the door open to additional policy support for the economy.